Vertu Motors has upped its full-year profit prediction by as much as £10m due to strong used car sales.
The dealer group had announced on July 29 it had revised its anticipated profit before tax for the six-month period ending August 31 to ‘no less than £40m’, and its full-year prediction upwards to between £40m and £45m.
But in a new announcement to the London Stock Exchange this morning (Aug 20), Vertu boosted its six-month prediction again to ‘no less than £50m’ and full-year to between £50m and £55m.
The trading update put the revision down to the ‘exceptional’ used car market.
It also said new car sales were in ‘excess’ compared to prior year levels, but cautioned the situation may change due to restricted new car supply, which, in turn, could affect used vehicle supply.
‘The group continues to experience strong used vehicle gross margin retention, driven by the exceptional UK used car market conditions,’ the update said.
‘Consequently, the group expects that it will deliver an adjusted profit before tax of no less than £50m in the six months to August 31, 2021.
‘The group’s like-for-like new vehicle order take for the key month of September is currently running in excess of prior year levels, however, there is a risk that well documented new vehicle supply shortages will result in vehicle deliveries being delayed into future periods.
‘As a consequence of reduced new vehicle supply, used vehicle supply may also be restricted in the coming months.’
Vertu also warned that ‘uncertainty also remains’ around staff absences due to the pandemic.
The update added: ‘The current UK wide labour shortages, high vacancy levels and upward pressure on employment costs remain a risk for the business.’
Overall, though, the dealer group said it remains ‘cautiously optimistic’ for the months ahead, and believes it’s ‘well placed’ to capitalise.
The statement said: ‘The board remains cautiously optimistic and is upgrading the estimate for profit before tax for the current financial year to be in the range of £50m to £55m (previously £40m to £45m).
‘As a result of the strong performance seen in the financial year to date, the board intends to re-establish the payment of dividends to shareholders upon finalisation of the interim results.
‘The board remains very confident in the prospects for the Group, which is strategically well placed to capitalise on the changes and opportunities in the UK motor retail sector.’
Vertu also issued a separate announcement detailing a share buyback programme.
Through an agreement with Zeus Capital, it intends to buy back ordinary shares of 10p of up to £3m, capped at 30 million shares, between now and the end of February 2022.
The statement said: ‘The share price of the company for some time has traded at a discount to the tangible net asset value and in the opinion of the board below the intrinsic value of the business.
‘As the company has a low level of debt and is considerably cash generative, the board considers it appropriate to allocate some capital to buy back shares.’
It went on to say: ‘Under the buyback programme, the company will seek to buy back its ordinary shares of 10p each using the company’s existing cash resources for an initial amount up to £3m, between now and February 28, 2022.
‘The debt capacity of the company and positive cash flow is such that we will continue to consider acquisition and investment opportunities as part of the pursuit of the ongoing growth of the business.